Lloyd's exemplifies London's phantom Brexodus

LONDON (Reuters Breakingviews) - Lloyd’s sums up London’s phantom exodus. A day after the UK formally announced the start of its two-year process to exit the European Union, its best-known insurance marketplace confirmed plans to open a new office in Brussels. The outflow of staff – in the mere tens, out of a UK workforce approaching 900 – is consistent with a sense that “Brexodus” is a steady trickle rather than a torrent.

Lloyd's of London staff hold their annual Remembrance Day service at the Lloyd's building in the City of London, Britain November 11, 2015. REUTERS/Stefan Wermuth

Lloyd’s monitors and supports 99 syndicates underwriting specialist insurance worldwide, who in 2015 wrote 11 percent of their gross written premiums in the European Economic Area. In doing something to preserve this arrangement, it is comparatively late to the party. The risk of UK entities losing access to European customers after Brexit has been obvious since the vote in June. But most big financial groups, like HSBC and Aviva, already have subsidiaries on the continent. How many staff need to actually move is a function of how much business the group does in the EU, and how antsy European regulators might be about the changed circumstances.

There is no way to spin this outflow as a good thing. Even if every financial firm moves only 10 percent of staff, that could still risk a tangible proportion of the 71 billion pounds of tax from financial services companies generated in 2016. UBS has said a fifth of its 5,000 London staff could be affected by Brexit, while a quarter of JPMorgan’s 16,000 UK staff could be.

Still, anecdotally bankers at the big firms think the exodus will be less, and London will retain its financial hub status. While a free trade agreement between the EU and the UK on favourable terms for finance seems far-fetched, it’s not impossible – and Prime Minister Theresa May on Wednesday said that a future free trade agreement ought to cover financial services. More simply, not many financial types want to leave London. As such, Lloyd’s is merely doing what every other firm is doing – acquiring an option that it hopes will expire, out of the money.

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